IP: Navigating a contested case trial in front of the new PTAB

Inter partes review (IPR) and covered business method patent review (CBM) proceedings have been available for 9 weeks—since Sept. 16. During the first two months of these proceedings, 51 IPR petitions and 14 CBM petitions have been filed, with only six being found non-compliant or incomplete. But the pace of filing during the second month has slowed significantly since the proceedings were introduced, as shown in the graph below.

New filings are declining and may remain low until the public sees how the newly constituted Patent Trial and Appeal Board (PTAB) deals with the initial set of petitions. Patent practitioners and corporate counsel alike should therefore pay close attention to this first set of proceedings. If the proceedings appear to have teeth, are tightly managed by PTAB and effectively and fairly meet the statutorily mandated deadlines, then an increase in filings is likely towards the end of 2013.

Until then, however, companies filing, or subject to, an IPR or CBM proceeding will find themselves in uncharted territory, with only the published rules and early PTAB decisions to guide them. Below we provide a brief overview of how these contested cases will likely proceed and discuss what inside counsel need to know to effectively manage a PTO contested proceeding.

Overview of the proceedings

The Trial Practice Guide provides a graphic of how a contested case will proceed. It is reproduced below:

The timeline shows all phases of the proceeding over an 18 month period. The petition filing and preliminary response are referred to as the pre-trial phase. The decision on the petition initiates the trial and determines its scope, claim-by-claim and ground-by-ground. The trial phase starts with a scheduling order and conference. The trial then proceeds as indicated with patent owners and petitioners having alternating periods for discovery, replies, and oppositions. The trial phase ends with an oral hearing, after which PTAB will render a final decision.

Important considerations for in-house counsel

There are several aspects of a contested proceeding that in-house counsel should pay close attention to when managing a case.

Early identification of issues is crucial. The timelines in contested proceedings are short and some issues require long lead times. For example, any attempt to antedate or “swear behind” a cited reference often requires a concerted effort to locate and review both conception and diligence evidence. Also, retaining appropriate subject matter experts who can effectively stand for deposition may be time-consuming. Finally, locating inventors (if necessary) and amassing secondary consideration evidence (if available) to rebut obviousness may also be long-lead-time items.

Claim construction is decided early. Petitioners must identify key claim terms and proposed constructions. In response, the patent-owner’s preliminary statement should also address claim construction. Based on the petitioner’s and patent-owner’s constructions, PTAB’s decision on the petition will set forth the scope of the proceeding on a claim-by-claim, ground-by-ground basis and will include claim constructions if there are disputed terms. Thus, a mini-Markman-style proceeding is effectively argued and decided by PTAB prior to initiating a trial. Like civil actions, claim construction is often dispositive. Accordingly, early and focused attention on claim construction is crucial, especially where concurrent enforcement proceedings are contemplated or in progress.

Discovery is limited, but real. The mere thought of “discovery” chills inside counsel with its associated costs, risks and headaches. The early cases will set the tone for discovery in contested cases. But if interference practice is any guide, obtaining discovery beyond the mandatory disclosures required by the rules will be very difficult. The most significant discovery costs will likely be for depositions of expert witnesses. Another potential cost may be discovery related to real-party-in-interest challenges where the facts suggest another party may be playing an undisclosed role in the proceeding. Under PTAB guidance, some of this discovery may even be sought prior to the decision on the petition.

Estoppels require early strategic consideration. Petitioners should consider the potential impact of estoppels before filing a petition. Strict page limits on the petition will force petitioners to use only the most compelling art and arguments. Petitioners will later be estopped from using art that “could have been raised” in the petition as a defense in any subsequent enforcement action. The estoppels adhere upon PTAB’s decision.

Do not neglect early settlement opportunities. The new proceedings provide for settlement. According to the Trial Practice Guide, however, settlement does not necessarily lead to termination of the proceeding. For example, if PTAB has already decided on the merits, it can still render its decision despite a late settlement. Therefore, parties should determine quickly whether settlement is an option and seek settlement early in the proceeding to increase the likelihood of termination of the proceeding.